Investors pump up biodiesel's prospects

Fueled by the growing popularity of biodiesel, Imperium Renewables has raised $113 million in equity and $101 million in debt financing to complete a refinery in Grays Harbor and begin work on three more in Hawaii, Argentina and an undisclosed East Coast location.

The Seattle company founded three years ago expects the Grays Harbor refinery to begin pumping out biodiesel in July, with more capacity than any other biodiesel refinery in the country: 100 million gallons a year.

That's more biodiesel than the entire U.S. used in 2005, but the fuel is gaining favor as an alternative to conventional diesel — partly for environmental reasons and partly because of rising petroleum prices.

Biodiesel burns cleaner than regular diesel and comes from renewable sources such as soybeans and canola.

Still, the Puget Sound Clean Air Agency does not recommend people with gasoline-powered cars trade them in for diesel-engine vehicles, the only kind that can take biodiesel.

"We hope that in a few years buying diesel will be very clean," said Leslie Stanton, the agency's team lead for climate protection and transportation planning. "But not right now."

She recommends that people who already have vehicles with diesel engines — often a Mercedes, Volkswagen or pickup — switch to biodiesel. Stanton said it's "a great thing" that Safeway started testing the sale of biodiesel at pumps in West Seattle this week.

Even Tom Marier, whose company sells biodiesel near University Village, said he wouldn't mind if Safeway and other big chains added more biodiesel pumps.

"More people will be interested in doing it, and we'll start to wean ourselves off petroleum," said Marier, vice president of Laurelhurst Oil, which sells mostly heating oil.

Some customers use biodiesel for environmental reasons. But many — including heavy diesel users like trucking and shipping companies — consider price more important.

Historically, conventional diesel costs less. Wednesday at Laurelhurst Oil's station, biodiesel was $3.03 a gallon. Conventional diesel — which Marier calls "dinodiesel" — was $2.78.

But crude-oil prices have hit historic highs over the past year, leading some large diesel buyers to consider using more biodiesel.

The excitement about biodiesel has Tyson Foods looking at its chicken fat differently.

Late last year, the company created a new unit, Tyson Renewable Energy, that is exploring ways to sell the fat for biofuels.

Another indication of how hot the fuel has become is the interest Imperium attracted from investors.

A few months ago, the company set out to raise $75 million to supplement the $10 million it initially raised in 2005.

It reeled in far more — $113 million — from investors that include funds affiliated with BlackRock Investment Management, Ecofin, Silver Point Capital and Treaty Oak Capital Management.

A subsidiary of the French bank Société Générale has arranged $101 million in debt financing that Imperium plans to use for ongoing operations, like buying seed oil.

Imperium plans to have four major facilities by the end of 2008, capable of producing 400 million gallons of biodiesel annually.

John Plaza, founder and president of Imperium, hopes he can keep the company's biodiesel prices competitive by spending less to build refineries and by making them more efficient.

The Grays Harbor facility cost $63 million, less than half of what competitors would spend, largely because Imperium used its own engineering and design, he said.

Plaza also wants to keep costs low by using more local seed oil, and he laments that only a million gallons a year of Washington-grown canola is available for use in the new refinery.

Other oil will come from Midwest soybeans and palm oil from sustainable farms and plantations in Malaysia, he said.

He won't name customers who have signed up for biodiesel from the new refinery, but said King County Metro has been a good customer of the small, 5 million gallon-a-year operation he used to get Imperium off the ground.

Washington state has mandated that 2 percent of all diesel in the state be biodiesel by November 2008, which could create demand for 20 million gallons a year.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

Biodiesel at Safeway

Dan Freeman has been selling biofuel to his clientele for more than five years in Ballard, but he was the first to get a tankful of biodiesel Wednesday at the Safeway pump station in West Seattle.

Rather than seeing Safeway's entry into the biodiesel business as competition, Freeman said he welcomes the supermarket giant as another way to get greener fuel into more tanks.

"It's a different clientele and a different blend," said Freeman, who sells B99 at Dr. Dan's Alternative Fuelwerks. Freeman said his biofuel is 99 percent free of petroleum products.

Safeway's entrance into the market marks the first time such a prominent chain has taken the plunge into alternative fuels, another indication the demand is growing.

Seattle Mayor Greg Nickels pumped the station's first tank of biodiesel into Dr. Dan's Volkswagen.

The fuel — a blend of 20 percent biodiesel made from soy and 80 percent petroleum product — was selling for just under $2.86 per gallon. It can be used by any vehicle with a diesel engine, Freeman said.

Unleaded gasoline at the Safeway station was priced at $2.53 per gallon.

Safeway spokeswoman Cherie Myers said that if the fuel sells well, Safeway will likely open two more stations, one in Ballard and another in Crown Hill.

Seattle Times staff reporter Christine Clarridge